Dive Brief:

• Discover Financial Services is investing $30 million in buy now-pay later (BNPL) payments provider Sezzle, to integrate a BNPL solution system on Discover’s card network, according to a July 15 press release from Sezzle. 

• Discover signed an agreement with Sezzle in February to enable merchants to use BNPL payment options on the Discover Global Network. Discover Global Network includes Discover Network, PULSE, Diners Club International, and “more than 20 alliance partner networks across the globe,” the release stated.

• The move comes after Discover’s competitors, Mastercard and Visa, are expanding their services to offer BNPL payments options on their respective networks. Globally, $995 billion is expected to be spent through BNPL payment options by 2026, up from an estimated $226 billion in 2021, according to a recent report by Juniper Research. 

Dive Insight:

Discover is buying approximately 4.6 million shares of Sezzle at a $6.58 per-share, according to the press release. The Riverwoods, Illinois-based card company will enter into an expanded partnership with Sezzle to develop a dedicated referral program that will introduce “Discover credit and debit products to Sezzle’s customer base,” the press release noted.

The company signed an agreement with Sezzle earlier this year to enable U.S. merchants to process BNPL payments on the Discover Global Network, with little to no upgrades to their existing payments systems.

Discover is working with Sezzle to enable merchants to provide payment options as it “can be beneficial, especially in the current economic environment,” Discover’s senior vice president of global business development and acceptance, Jason Hanson said in February.

Discover said it has more than 48 million merchant acceptance locations and it is accepted by 99% of places that take credit cards in the United States.

“Discover’s capabilities via their network and financial products will enhance” Sezzle's offerings for its 2.6 million active consumers, Sezzle Executive Chairman and CEO Charlie Youakim said in a statement. Total payment volume on Sezzle rose to $856 million in 2020 compared to $244 million in 2019, a Sezzle spokesperson said. 

Recently, Discover rival Visa launched its BNPL payment option — for the first time anywhere in the world — for Canadian merchants, where deferred payment adoption increased by 30% in 2020. “Currently, three Canadian issuers, Scotiabank, CIBC and Desjardins, have announced their participation in the Visa Installments Solution,” Visa Canada VP and Head of Product and Digital Brian Weiner said in an email. The company will roll out more BNPL services, which are currently in their pilot phase in September/October, as the demand for deferred payments increases, Weiner said.

Sezzle, the Minneapolis based-company, has been listed as a public company in the Australian Stock Exchange and recently filed an intent to go public in the U.S. as well. 

“It wasn't until recently that investors in the US began to gain an appreciation of the potential for BNPL,” a Sezzle spokesperson said in an email.